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Seoul’s Gangnam district – made famous globally by K-pop rapper Psy whose “Gangnam Style” video has been seen more than any other on YouTube with over 2.5 billion views – is also a hotspot for start-up businesses. “It’s a mix of San Francisco and New York City,” explains Jung-hee Ryu, CEO of FuturePlay, a local venture capital firm. “It has the best of both, a large engineering community combined with a strong cultural environment.” This has created an atmosphere where technology entrepreneurship in particular is considered very trendy.

It has also contributed to a culture of information sharing among entrepreneurs. “Seoul is unique because as opposed to many other Asian cities there is a culture where successful entrepreneurs help others and often become investors,” explains Mr Ryu, citing himself as evidence. He sold his company to Intel in 2012 and after a two-year stint with the American technology giant decided to start FuturePlay to help others. “I believe many Korean technology start-ups can be sold to Silicon Valley,” he asserts. “Seoul engineers are very talented but the problem is that they don’t know how to be entrepreneurs.” It simply boils down to the lack of an entrepreneurial culture historically, which means that many find it difficult to start a business because there is no tradition of doing it.

“Seoul engineers are very talented but the problem is that they don’t know how to be entrepreneurs.”

-Jung-hee Ryu, CEO of FuturePlay

The EIU survey bears this out: only about 1 in 10 survey takers (11%) in Seoul said it was easy to start a business in the city, compared with a global average of about one-quarter (26%) who said the same about their cities.

Nowhere to turn

The Korean government has strongly supported technology and R&D development since the 1950s and in the past three decades has also focused on building out information infrastructure, such as broadband connectivity in which the country is amongst global leaders both in terms of penetration, speed and affordability. This has created a world-class enabling environment; however, much of the money has either been spent on pure infrastructure or found its way into one of the country’s chaebols, which are dominant conglomerates such as Samsung, LG and SK Group. “There is a disconnect,” observes Sean Lee, co-founder of Seoul Space, a Gangnam “hub” that serves as a co-working space, incubator, accelerator and information centre for entrepreneurs. “There is very little money available in the start-up ecosystem because access to government programs is often limited to a handful of companies.”

Only 4% of respondents in Seoul said their government is “very effective” in supporting entrepreneurs compared to an average of 15% among global entrepreneurs.

This sentiment is reflected in the survey. Only 4% of respondents in Seoul said their government is “very effective” in supporting entrepreneurs compared to an average of 15% among global entrepreneurs. Similarly, business and industry associations are deemed far less “very important” in Seoul (7%) when compared globally (25%) as are incubators and accelerators (8% vs 24%).

Seoul Space is one organisation that tries to bridge the gap. “We all recognised this is chaebol country and that start-ups are at a disadvantage,” says Mr Lee. “We want to help start-ups get a piece of the pie.” While working at one of the chaebols in 2009, Mr Lee and three of his would-be co-founders realised that entrepreneurs in Seoul needed help. They are an eclectic mix that had met at events where they had pitched different business ideas but they turned out to be a natural fit because Mr Lee knew how to build a website; another co-founder worked in real estate; one for a technology company and one was well-connected.

Linguistic barriers

Seoul Space caters to both expats and locals, albeit for the same reason: access to information. Expats often struggle with the fact that everything is in Korean. Meanwhile local entrepreneurs find it hard to grow their business outside of the peninsula. “All the content created is in Korean and we provide a type of bridge to the world,” says Mr Lee, who as an American-Korean is fluent in both languages. As an example, he says many innovative Seoul entrepreneurs would like to raise money on Kickstarter, the global fundraising platform, but they are unable to because of linguistic barriers.

Indicative of this, the EIU survey shows that when starting their business, it was much less common for entrepreneurs from Seoul (16%) to engage in global online networking than the global average (48%). Local versions supplement this deficiency but they lack the global benefits of international platforms. For instance, there are equivalents to Kickstarter in Korea but since they are based solely on the domestic market, there are typically not enough users and large enough amounts of money to be able to fund initiatives.

As a result, Mr Lee considers the informal environment for entrepreneurs to be very important. Seoul Space is trying to capitalise on this notion by turning them into formal ones. Once a quarter the “hub” organises an event, often sponsored by a big company, to engage local entrepreneurs. Stemming from a lack of information from other sources they can attract anywhere between 300 to more than 1,000 people.

A changing culture?

The promises of the Gangnam district apart, Seoul and Korea generally, still face socio-cultural challenges when it comes to entrepreneurship. One is that large domestic actors don’t acquire local start-ups. Another is the traditional belief that working for a bigger company is better. “The biggest challenge for entrepreneurs is still stigma,” says Mr Lee. “Your family expects you to work for a chaebol and if you don’t they will ask why.” This might be one reason that Seoul has the fewest percentage of young entrepreneurs, ages 18 to 35, in the survey sample (8%) compared to the global average (47%).

Although Mr Ryu agrees with this sentiment he says it might be changing. “Only five years ago, this was the case but people now see large companies losing market share globally and a lot of young people now want to run their own company.” Hence, a cool start-up culture might have manifested itself in Seoul, Gangnam Style.